Hedge funds suffer biggest losses since the financial crisis

August was the worst month since October 2008 for the industry

August was the cruellest month for hedge funds, which suffered their steepest losses since the financial crisis, according to new figures.

Funds’ strategies lost $88.9bn during the month, the largest performance losses since October 2008, as runctions in Chinese markets caused large price swings across continents and asset classes.

Despite the steep losses, the hedge funds managed to attract $10.5bn in net new money from investors in August, bringing their overall loss for the month to $78.4bn, according to data from Citigroup. Investors have committed more money than they have withdrawn from hedge funds in eight of the past 12 months.

In the year to date, the $3.05 trillion hedge fund industry has lost a total of $59.3bn, and several funds have decided to liquidate their strategies to stem further losses.

The investment outfit Bain Capital has this week told investors that its Absolute Return Capital fund will be wound down after three years of losses, including a reported 14pc decline in the first eight months of 2015. About three-quarters of the $2.2bn fund was external client money, according to Bloomberg.

"As you know, the environment for global macro fundamentals-based trading continues to be challenging," Bain Capital told clients. "That factor, combined with the lack of certainty over when a recovery will take hold, led us to conclude that the time was right to return capital to you."

The hedge fund industry covers a range of investment strategies, from bets on the overall direction of the economy to fast-moving trades on particular sectors of the stock market. While market volatility can bring with it enormous gains for some funds, it also brings major casualties, particularly those with big positions in the stock markets during this summer’s turbulence.

Bill Ackman, head of Pershing Square Capital Management, this week said that market movements were being driven by “a huge amount of money that moves without regard to long-term economic fundamentals”.

Pershing’s main fund has lost 12.6pc in the year so far after large drops in some of its key holdings, including Valeant Pharmaceuticals.

Greenlight Capital and Third Point, run by David Einhorn and Daniel Loeb respectively, have also posted single-digit percentage losses for September.

Recent research from Preqin found that hedge funds managing more than $1bn were performing better than the boutique funds, with a poll of 300 managers pointing to a 1.49pc loss in August and a 4.3pc gain over the past year.